Correlation Between IShares MSCI and Tetragon Financial

Can any of the company-specific risk be diversified away by investing in both IShares MSCI and Tetragon Financial at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining IShares MSCI and Tetragon Financial into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between iShares MSCI USA and Tetragon Financial Group, you can compare the effects of market volatilities on IShares MSCI and Tetragon Financial and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in IShares MSCI with a short position of Tetragon Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares MSCI and Tetragon Financial.

Diversification Opportunities for IShares MSCI and Tetragon Financial

0.8

Correlation Coefficient

IShares MSCI  Tetragon Financial

Very poor diversification

The 3 months correlation between IShares and Tetragon is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding iShares MSCI USA and Tetragon Financial Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tetragon Financial and IShares MSCI is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on iShares MSCI USA are associated (or correlated) with Tetragon Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tetragon Financial has no effect on the direction of IShares MSCI i.e., IShares MSCI and Tetragon Financial go up and down completely randomly.

Pair Corralation between IShares MSCI and Tetragon Financial

Assuming the 90 days trading horizon IShares MSCI is expected to generate 6.17 times less return on investment than Tetragon Financial. But when comparing it to its historical volatility, iShares MSCI USA is 3.62 times less risky than Tetragon Financial. It trades about 0.14 of its potential returns per unit of risk. Tetragon Financial Group is currently generating about 0.24 of returns per unit of risk over similar time horizon. If you would invest  986.00  in Tetragon Financial Group on September 16, 2024 and sell it today you would earn a total of  424.00  from holding Tetragon Financial Group or generate 43.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	96.97%
Values	Daily Returns

iShares MSCI USA  vs.  Tetragon Financial Group

iShares MSCI USA

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in iShares MSCI USA are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, IShares MSCI is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Tetragon Financial

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Tetragon Financial Group are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain technical and fundamental indicators, Tetragon Financial unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with IShares MSCI and Tetragon Financial

The main advantage of trading using opposite IShares MSCI and Tetragon Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares MSCI position performs unexpectedly, Tetragon Financial can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Tetragon Financial will offset losses from the drop in Tetragon Financial's long position.

The idea behind iShares MSCI USA and Tetragon Financial Group pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.